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Semelhante a Case Analysis Project - Papa Johns
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Case Analysis Project - Papa Johns
- 1. Papa John’s International Inc. Course J401 | Section 21414 C 40 – C 49 Team Leader: Mariana Freitas Team Members: Peyton Balazs Autumn Gordon Simran Saini Ashton Wagler April 14, 2016 Team 2
- 2. Peyton Balazs: Senior | Marketing Major Autumn Gordon: Junior | Accounting & Finance Major Mariana Freitas: Junior | Finance & International Studies Major |Economics Minor Simran Saini: Junior | Accounting & Finance Major | Economics Minor Ashton Wagler: Senior | Accounting & Finance Major TEAM MEMBERS Papa John's | Final Case Analysis | 2
- 3. In this presentation, Team 2 will present a final analysis on Papa John’s International, Inc. We will begin with an overview of the mission and values of Papa John’s, the board of directors, and a brief recap from the Case IQ presentation. Firstly, Team 2 will focus on Papa John’s growth strategy along with an updated SWOT analysis, marketing strategy, and technology strategy. We will then present an overview of the pizza industry and discuss Papa John’s main competitors. We will then cover the franchise component, domestic and international expansion, and an analysis on the U.K. and China market. Lastly, we will conduct a financial analysis on the company. To conclude, Team 2 will highlight system-wide risk factors and risks specific to Papa John’s, as well as provide recommendations from analysts and our group members. Please contact us via e-mail with any questions or concerns regarding our presentation Mariana Freitas mm233@iupui.edu Peyton Balazs pbalazs@iupui.edu | Autumn Gordon augordon@iupui.edu Simran Saini sainis@iupui.edu | Ashton Wagler atwagler@iupui.edu EXECUTIVE SUMMARY Papa John's | Final Case Analysis | 3
- 4. TABLE OF CONTENTS Papa John's | Final Case Analysis | 4 Company Overview......................................................................................................................................... Company Facts................................................................................................................................. Mission and Values.......................................................................................................................... Board of Directors............................................................................................................................ Case IQ Recap................................................................................................................................................... Papa John’s Strategy 2013-2015...................................................................................................................... Growth Strategy................................................................................................................................ SWOT Analysis................................................................................................................................. Marketing Strategy........................................................................................................................... Papa Rewards................................................................................................................................... Technology Strategy......................................................................................................................... POS System FOCUS........................................................................................................................ The Pizza Industry 2013-2015........................................................................................................................ The Pizza Industry........................................................................................................................... Competitors...................................................................................................................................... Papa John’s Global Expansion 2013-2015.................................................................................................... Franchise vs. Corporate................................................................................................................... International Locations.................................................................................................................... Global Units Openings.................................................................................................................... International Markets...................................................................................................................... China Market.................................................................................................................................... 6 7 8 9-10 11-12 13 14 15 16-17 18 19 20 21 22 23 24 25 26 27 28 29
- 5. TABLE OF CONTENTS Papa John's | Final Case Analysis | 5 Financial Analysis 2013-2015......................................................................................................................... Stock Analysis.................................................................................................................................. Revenues........................................................................................................................................... Debt and Margins............................................................................................................................ Free Cash Flow…............................................................................................................................. Growth.............................................................................................................................................. Risk Factors, Looking Forward, and Recommendation........................................................................... Risk Factors...................................................................................................................................... 2016 Guidance.................................................................................................................................. Analyst Recommendation.............................................................................................................. Team 2 Recommendation............................................................................................................... Questions........................................................................................................................................... References.......................................................................................................................................................... Work Papers...................................................................................................................................................... Attendance........................................................................................................................................ Meeting Minutes.............................................................................................................................. Timesheets......................................................................................................................................... 30 31 32 33 34 35 36 37 38 39 40 41 42-43 44 45 52 59
- 6. Papa John's | Final Case Analysis | 6 COMPANY OVERVIEW
- 7. COMPANY FACTS Beginning: Jeffersonville, Indiana Headquartered: Louisville, Kentucky Financial Year End: December Employees as of December 27, 2015: 22,350 Market Cap: $2.14B as of April 13, 2016 Ticker Symbol: PZZA Exchange: NASDAQ Papa John's | Final Case Analysis | 7 First Papa John’s Restaurant in Jeffersonville, IN Source: Yahoo! Finance, Bloomberg Terminal
- 8. Source: Papa John’s Website MISSION & VALUES Customers Papa John’s will create superior brand loyalty, i.e. “raving fans”, through (a) authentic, superior-quality products, (b) legendary customer service and (c) exceptional community service. Team Members People are our most important asset. Papa John’s will provide clear, consistent, strategic leadership and career opportunities for Team Members who (a) exhibit passion toward their work, (b) uphold our Core Values, (c) take pride of ownership in building the long-term value of the Papa John’s brand and (d) have ethical business practices. Franchisees We will work as a team with our franchisees to create continued opportunity for outstanding financial returns to those franchisees who (a) adhere to Papa John’s proven Core Values and systems, (b) exhibit passion in running their businesses and (c) take pride of ownership in building the long-term value of the Papa John’s brand. Shareholders We will produce superior long-term value for our shareholders. P.A.P.AAccountability Attitude Constant Improvement Focus Superiority Papa John's | Final Case Analysis | 8
- 9. Norborne P. Cole Jr. Chair of the Compensation Committee | Appointed in 2003 Christopher L. Coleman Audit Committee & Corporate Governance and Nominating Committee | Appointed in 2012 Olivia F. Kirtley Chair of the Audit Committee & Compensation Committee |Appointed in 2003 Source: 2014 Annual Report BOARD OF DIRECTORS John Schnatter Founder, Chairman & Chief Executive Officer | Appointed in 1984 Papa John's | Final Case Analysis | 9
- 10. Laurette T. Koellner Audit Committee & Corporate Governance and Nominating Committee | Appointed in 2014 Sonya E. Medina Corporate Governance & Nominating Committee | Appointed in 2015 Mark S. Shapiro Audit Committee | Corporate Governance and Nominating Committee | Appointed in 2011 W. Kent Taylor Compensation Committee | Appointed in 2011 Source: 2014 Annual Report BOARD OF DIRECTORS Papa John's | Final Case Analysis | 10
- 11. Papa John's | Final Case Analysis | 11 CASE IQ RECAP
- 12. Founder John Schnatter History 1984-2013 Marketing and Advertising Industry • Market Share • Industry Trends Competition • Direct • Indirect Strategy • Five Components • SWOT Analysis Franchises • Requirements • Modifications Porter’s Five Forces Source: Team 2 Case IQ Presentation Papa John's | Final Case Analysis | 12
- 13. Papa John's | Final Case Analysis | 13 PAPA JOHN’S STRATEGY 2013-2015
- 14. GROWTH STRATEGY 6 Year Plan 2013 Plan: Open 1,200 net units globally by 2018 (180 to 210 net global unit openings a year) • #1 in the 2015 American Customer Satisfaction • Leader in the pizza category and #2 in total of all QSR in customer experience in the Temkin Experience Rating Customer Satisfaction Maintain Premium Pricing • Clean Label Initiative • Quality Guarantee • Papa’s Lighter Choices menu offerings and Online Nutrition Calculator • Summer 2016: First national pizza chain to use poultry raised without human or animal antibiotics, as well as fed with a 100% vegetarian diet Quality Focused Reduce “pass- throughs” and reimbursements in the form of discounts, and invest that in marketing to build the brand and to create a stronger emotional connection with customers Source: 2013 Q1 & Q4 Earnings Call, 2015 Q1, Q3 & Q4 Earnings Call Papa John's | Final Case Analysis | 14
- 15. SWOT ANALYSIS Source: Papa John’s Website, 2014 & 2015 10K, Franchise Help Holdings LLC, Statista, Fast Food Menu Prices, BLS, Tampa Bay Times, 2015 Nielsen Global Health and Wellness Survey, United States Department of Agriculture Strengths • Community Oriented – Contributed more than $1 million toward disaster recovery and relief since 2012. Also donated approximately $1.3 million to the JA Program • Better Quality – Ranked #1 in customer satisfaction by American Customer Satisfaction Index for 13/15 years • Marketing Techniques – Official sponsor of over 350 professional and collegiate sports teams • Efficient Operating System – Implementation of FOCUS Opportunities • Franchising – Signed agreements to open approximately 1,000 international franchise units over the next six years • Social Media Advertising – Only 16% of people in the United States place orders online • Projected Industry Growth – Expected growth of 3.06% by 2020 in the United States Weaknesses Threats • Limited Menu – Does not offer options such as sandwiches, salads, or pasta, compared to other industry leaders • Higher Price – Approximately $1-2 above other industry leaders • Dine-In Options – “Few” locations because it reduces operating costs • Delivery Driving Service – Fatalities in Driver/Sales occupation occur at a rate of 24.3%, approximately seven times more than overall workplace average • High Competition – Moved from third-largest pizza chain to fourth place • Health Awareness – 2015 Nielsen Survey indicated 69% of consumers are eating healthier • Price of Ingredients – Food prices increased 2.9% in 2015 SWOT Analysis Papa John's | Final Case Analysis | 15
- 16. • Local Level - Target consumers within the delivery area of the restaurant - Community orientated activities within schools, sports venues, and other organizations - Special promotions • National Level - Television, print, direct mail, digital, mobile marketing, and social media - “Co-op” – Individual Papa John’s may be obliged to contribute percentage of sales towards market- wide advertising campaign MARKETING STRATEGY Papa John's | Final Case Analysis | 16 • Papa John’s Marketing Fund • International Level - Focus: people who live or work within a small radius of a Papa John’s restaurant - Radio, television, mobile-marketing, print materials, and digital marketing - Local promotions to raise awareness: community events, sporting events, and school programs Source: 2015 Annual Report, 2014 Q1 Earnings Call
- 17. • Official Pizza Sponsor of the NFL - 41% polled named Papa John’s most active sponsorship of NFL (2013) • Peyton Manning - 62% named him face of the NFL (2013) - Owner of 27 Papa John’s Franchises - Market Cap was $900 M in 2012 (Manning), now $2.14 B • J.J. Watt - New spokesman for Papa John’s - All Pro defensive player, considered one of the most prominent faces of the NFL • Specials and Promotions - “Double Cheeseburger Pizza” - Official pizza of the MLB (April 3, 2016) Source: 2013 and 2015 Q4 Earnings Calls, 2015 Annual Report, PapaJohns.com/Investor Relations Papa John's | Final Case Analysis | 17 MARKETING STRATEGY
- 18. • Four step loyalty program that allows Papa John’s customers to earn discounts based on their amount of spending - Example: large 2-topping pizza – 20 points; garlic knots – 10 points Source: 2016 Company Presenation, PapaJohns.com, 2015 Annual Report Papa John's | Final Case Analysis | 18 • Increases loyalty in a value-driven category - Papa Rewards surpasses other major brands as favorite dining/QSR loyalty program in Bond Brand Loyalty Report • “Papa Card” 1. Sign up online for Papa Rewards 2. Place order online 3. Earn 1 point with every $5 you spend 4. Redeem your points for Papa John’s products PAPA REWARDS
- 19. • Highest digital sales mix in category - Mobile represents over 50% of total digital sales • Highest rating according to The Search Agency Report “The Mobile Experience Scorecard – Restaurants and Catering” • iOS app upgrade (Feb 24, 2015) - Current iOS version: 969 Customer Reviews with an average rating of greater than 4 out of 5 stars • Fully responsive web design to improve the customer online/mobile experience - Ability to change size and aspect ratio based upon individual screen size • e-Commerce - Pay Share (April 2015) Source: 2015 Annual Report, 2016 Company Presentation, 2013 Q4 Earnings Call, iTunes Store Papa John's | Final Case Analysis | 19 TECHNOLOGY STRATEGY
- 20. • New point-of-sale system (FOCUS) • Implementation: 2015, in all North American traditional restaurants - Lowered income before taxes by $1.8 M - Increased Other Sales by $8.9 M primarily due to FOCUS equipment being sold to franchisees Papa John's | Final Case Analysis | 20 Source: 2015 First Quarter Results, 2015 Q1 Earnings Call, 2015 Annual Report • Expected to improve labor costs over time - Quicker employee training • Touch screen technology - Improve in-store customer experience - Drive speed and order accuracy POS SYSTEM FOCUS
- 21. Papa John's | Final Case Analysis | 21 THE PIZZA INDUSTRY 2013-2015
- 22. THE PIZZA INDUSTRY 6.5% 7.9% 14.8% 9.9% 20.2% 40.9% Market Share Percentage of Sales Pizza Industry - 2014 Papa John's Little Caesars Pizza Hut Domino's Other Chains Independent Chains Papa John’s ↑0.5% Domino’s ↓0.1% Little Caesars ↑3.2% Pizza Hut ↑3.3% Other Chains ↑0.6% Independent Chains ↓7.3% Percentage Change in Market Share Since 2013 Source: Thompson, Crafting and Executing Strategy: The Quest for Competitive Advantage (20th Ed.), 2016, Business Insights, Yahoo! Finance 33.65 6.83 2.14 Market Cap in Billions Big Four in the Pizza Industry 2015 Yum! Brands Domino's Papa John's Note: Little Caesars is privately held Papa John's | Final Case Analysis | 22 • Overview of the Pizza Industry - Worldwide sales for 2012 and 2017 (projected) were $42.8 B and $49.5 B, respectively - Estimate worldwide sales for 2015 were $46.7 B (CAGR 2.95%) - Worldwide establishments in 2012 and 2017 (projected) were 74,400 and 86,493, respectively - Estimate worldwide establishments for 2015 were 81,441 (CAGR 3.06%)
- 23. COMPETITORS Source: Thompson, Crafting and Executing Strategy: The Quest for Competitive Advantage (20th Ed.), 2016, Pizza Hut 2015 Report, Pizza Hut Website, Domino’s 2015 Annual Report, Little Caesars Website • Growth strategy is increasing net openings outside of the U.S. • Want to sharpen brand position by concentrating on product customization, transparency, and leading innovation/engagement through technology • Planning to split into Yum! China and Yum! by the end of 2016 • 2015 Year End Store Count: 16,063 • Growth strategy is dependent on global expansion • Transforming all locations by the end of 2017 to increase hospitality in locations • Leader in technology with apps in many different operating systems • Convenient store locations and efficient supply chain • 2015 Year End Store Count: 12,530 • “Highest-Rated Chain – Value for the Money” based on a nationwide survey of quick-service restaurant consumers conducted by Sandelman & Associates, 2007-2014 • Innovation - recognized pioneer in pizza industry, such as the "two pizzas for the price of one" deal Commonalities: All the major players in the pizza industry are focused on franchising, expanding internationally, and utilizing technology Papa John's | Final Case Analysis | 23
- 24. PAPA JOHN’S GLOBAL EXPANSION 2013-2015 Papa John's | Final Case Analysis | 24
- 25. • Owning corporate restaurants helps franchises implement Papa John’s best practices and strategies • Outperformance of company stores relative to the franchises - Corporate stores are in more tenured and penetrated markets • Papa John’s is in the process of weeding out the franchisees that are not engaged - Higher store closures in 2015 Source: 2013 Q1 Earnings Call, 2015 Q3 & Q4 Earnings Call FRANCHISE vs. CORPORATE Papa John's | Final Case Analysis | 25 Company- owned Franchised North America 665 2,621 International 58 1,084 Company- owned Franchised North America 707 2,681 International 45 1,460 Worldwide Net Units as of December 27, 2015 Worldwide Net Units as of December 29, 2013
- 26. Source: Papa John’s 2016 Company Presentation INTERNATIONAL LOCATIONS Papa John's | Final Case Analysis | 26 Papa John’s global presence and net units in each country as of December 27, 2015
- 27. • As of 2013: 4,200 units in 34 countries and plan is to open 1,200 net units in the next 6 years • Opened a total of 730 net units from 2013 to 2015 • The plan was to open approximately 200 net units a year, therefore, Papa John’s exceeded their goal by 21.7% in the past 3 years • Projection for 2016: to open 180 to 210 net units worldwide Q1 34 Q2 55 Q3 44 Q4 132 Q1 12 Q2 47 Q3 50 Q4 126 Q1 36 Q2 35 Q3 52 Q4 107 2013 2014 2015 Units Opened per Quarter 2013-2015 Net units opened in North America and Internationally from 2011 to 2015 Source: Papa John’s 2016 Company Presentation, 2013 Q1 Earnings Call, 2015 Q4 Earnings Call GLOBAL UNITS OPENINGS Papa John's | Final Case Analysis | 27
- 28. INTERNATIONAL MARKETS Source: Market Line, 2015 Q3 Earnings Call U.K. 319 franchises China 45 company-owned and 199 franchises Why the U.K. and China? The U.K. and China are the two international markets with the highest number of Papa John’s restaurant units. After conducting research, Team 2 constructed an analysis chart with possible reasons to why these two markets are favorable to Papa John’s. • GDP growth from $2.40 trillion to $2.58 trillion* • Unemployment rate decreased from 7.92% to 5.70%* • Corporate tax reduction to 20% as of April 1, 2015 • Stable governance system ensures that there is remarkable consistency in its policies • The country scores high in business, labor, trade, investment and financial freedom • According to Market Line, it ranks 17th in “getting credit”, meaning companies face fewer hurdles in terms of meeting working capital and long-term capital requirements • GDP growth from $4.87 trillion to $5.6 trillion* • Middle class and consuming class potentially growing to 600 million over the next 5 to 6 years • According to S&P, the government initiatives to reduce corruption, measures to enhance business environment and liberalize the financial sector, will boost the economy • As of June 2015, China’s central bank cut the benchmark interest rate 4 times since Nov. 2014. The recent interest rate cut by 25 basis points in June 2015 was to support the development of the economy Papa John's | Final Case Analysis | 28*From 2013 to 2015
- 29. CHINA MARKET Source: 2014 Q2 & Q3 Earnings Call, 2015 Q4 Earnings Call • Why is China the only International market that has corporate-owned units? - China is a different market than any market in the world, therefore, Papa John’s must approach it differently - By owning corporate restaurants in China, franchisees can better understand how to implement Papa John’s best practices and strategies • 2014: Partnership deal where Papa John’s is the official pizza sponsor of the Guoan Football Club in Beijing • 2014: OSI incident in China held back growth • 2015: Long-term plan is to close the company- owned in China and let another qualified franchisee take over operations Strategic Model Incorporate Menu Branding Aspects Marketing Changes Model Design Papa John's | Final Case Analysis | 29
- 30. Papa John's | Final Case Analysis | 30 FINANCIAL ANALYSIS 2013-2015
- 31. Source: Bloomberg Terminal, http://ir.papajohns.com/calculator.cfm STOCK ANALYSIS • IPO on June 8, 1993 traded at $2.90 a share and netted $12 M • Stock Splits: - 3-for-2 (two in 1996) - 2-for-1 (2005 and 2013) • If you had invested $1,000 at the time of the IPO, by April 8, 2016, the value would be $24,920.98 Papa John’s IPO to current stock price (04/10/2016) Papa John's | Final Case Analysis | 31
- 32. REVENUES • 2015 revenue of $1.6 B, a 2.5% increase compared to 2014 (increase of 4.2% for North America and 6.9% internationally) • Only brand that has had 12 consecutive years of even or positive sales • CAGR from 2011 to 2015 of 7.68% Revenues from 2011 to 2015 for Domestic Company-Owned Restaurants, Domestic Commissaries, Domestic Franchising, and International Restaurants Source: Bloomberg Terminal, 2015 Q4 Earnings Call Papa John's | Final Case Analysis | 32
- 33. Source: Bloomberg Terminal, 2015 Annual Report • Debt-to-Equity: 506.24% - 2015 net debt was $256 M, an 11% increase - Significant increase in investments in technology, marketing, and international markets • Profit Margin: 5.92% & Gross Margin: 32.4% - Profit margin and gross margin are very erratic due to the volatile environment (i.e. commodity prices, restaurant level bonuses, competitors pricing) Total Debt to Total Equity, Profit Margin, and Gross Margin from 2011 to 2015 DEBT & MARGINS Papa John's | Final Case Analysis | 33
- 34. Source: Bloomberg Terminal, 2013 Annual Report Free Cash Flow from 2011 to 2015 FREE CASH FLOW Papa John's | Final Case Analysis | 34 • Capital primarily used for: - Development, acquisition, renovation and maintenance of restaurants - Development, renovation and maintenance of commissary print and promotions facilities and equipment - Enhancement of corporate systems and facilities • CAGR 14.06% from 2011 to 2015
- 35. Source: Bloomberg Terminal, 2015 Annual Report • ROCE: 130.7% • Dividends: 32.7% - Initial payout 2013 - Annual Dividend $0.70 • SGR: 87.8% - Increased retained earnings 54% in 2015 ROCE, Dividends Payout Ratio, and SGR from 2011 to 2015 GROWTH Papa John's | Final Case Analysis | 35
- 36. Papa John's | Final Case Analysis | 36 RISK FACTORS, LOOKING FORWARD, & RECOMMENDATIONS
- 37. Source: 2015 Annual Report • Increase in commodity prices - Competitive strength is quality - Refuse to compromise to save money - Cheese is largest food cost • Foreign currency risk - Negative impact of $2.7 million in 2015 - Pressurizes franchisees’ cash flows • John Schnatter - No employment agreement - No “key man” life insurance - Major component in promotions - Owns 27% of common stock • Lawsuits RISK FACTORS Papa John's | Final Case Analysis | 37
- 38. Source: 2015 Q4 Earnings Call 2016 Annual Meeting of Shareholders Thursday, April 28, 2016 – 11:00 AM ET International growth opportunities 5 years out: Brazil, South Africa, Australia and countries throughout Western Europe Consolidated revenues growth of 4% to 6% and 180 to 210 net global unit openings, substantially all of which are expected to open in the final three quarters of the year North America full-year comparable sales growth of 2% to 4% and International full-year comparable sales growth of 5% to 7% Anticipate opening their 5,000th store globally Summer 2016 2016 GUIDANCE Papa John's | Final Case Analysis | 38
- 39. Source: Bloomberg Terminal ANALYST RECOMMENDATION According to the Bloomberg Terminal as of April 8, 2016, 4 out of 7 analysts from the firms listed below recommend to buy Papa John’s stock Analyst recommendations from the Bloomberg Terminal Papa John's | Final Case Analysis | 39
- 40. TEAM 2 RECOMMENDATION Papa John's | Final Case Analysis | 40 As a group, Team 2 reached a consolidated conclusion that we would buy Papa John’s stock. Papa John’s has a great potential for growth, as they are constantly investing in the company. They have developed innovative ways to run the business and expand into new markets. They also strongly believe in quality, so customers and investors can rely on carefully-inspected and prepared food. Although Papa John’s may be growing slower than their competitors, they focus on their long-term strategy and refuse to compromise their quality in order to compete on pricing. These qualities forecast long-term success and a profitable investment.
- 41. “When it comes to quality there is absolutely no compromise, no compromise ever” – J. Schnatter QUESTIONS? Source: 2015 Q3 Earnings Call Papa John's | Final Case Analysis | 41
- 42. Papa John's | Final Case Analysis | 42 REFERENCES
- 43. RECOMMENDATIONS • 2015 First Quarter Results • 2015 Nielsen Global Health and Wellness Survey • http://ir.papajohns.com/calculator.cfm • Bloomberg Terminal • Bureau of Labor Statistics • Business Insights • Domino’s 2015 Annual Report • Fast Food Menu Prices • Franchise Help Holdings LLC • Little Caesars Website • Market Line • Papa John’s 2014 & 2015 Annual Report • Papa John’s 2016 Company Presentation • Papa John’s 2013, 2014, & 2015 Earnings Calls • Papa John’s Website • Pizza Hut 2014, 2015 Report • Pizza Hut Website • Statista • Tampa Bay Times Papa John's | Final Case Analysis | 43 • Thompson, Crafting and Executing Strategy: The Quest for Competitive Advantage (20th Ed.), 2016 • United States Department of Agriculture • Yahoo! Finance
- 44. Papa John's | Final Case Analysis | 44 WORKPAPERS
- 45. Papa John's | Final Case Analysis | 45 ATTENDANCE
- 46. Attendance – March 29th, 2016 Team 2: Papa John's International, Inc.: Its Strategy in the Pizza Restaurant Industry J401 - Section 21414 Location: Library Team Leader Signature: _____________________________________________________ Members Signature Peyton Balazs Autumn Gordon Mariana Freitas Simran Saini Ashton Wagler
- 47. Attendance – March 31st, 2016 Team 2: Papa John's International, Inc.: Its Strategy in the Pizza Restaurant Industry J401 - Section 21414 Location: Library Team Leader Signature: _____________________________________________________ Members Signature Peyton Balazs Autumn Gordon Mariana Freitas Simran Saini Ashton Wagler
- 48. Attendance – April 7th, 2016 Team 2: Papa John's International, Inc.: Its Strategy in the Pizza Restaurant Industry J401 - Section 21414 Location: Library Team Leader Signature: _____________________________________________________ Members Signature Peyton Balazs Autumn Gordon Mariana Freitas Simran Saini Ashton Wagler
- 49. Attendance – April 11th, 2016 Team 2: Papa John's International, Inc.: Its Strategy in the Pizza Restaurant Industry J401 - Section 21414 Location: Library Team Leader Signature: _____________________________________________________ Members Signature Peyton Balazs Autumn Gordon Mariana Freitas Simran Saini Ashton Wagler
- 50. Attendance – April 13th, 2016 Team 2: Papa John's International, Inc.: Its Strategy in the Pizza Restaurant Industry J401 - Section 21414 Location: Library Team Leader Signature: _____________________________________________________ Members Signature Peyton Balazs Autumn Gordon Mariana Freitas Simran Saini Ashton Wagler
- 51. Attendance – April 14th, 2016 Team 2: Papa John's International, Inc.: Its Strategy in the Pizza Restaurant Industry J401 - Section 21414 Location: Library Team Leader Signature: _____________________________________________________ Members Signature Peyton Balazs Autumn Gordon Mariana Freitas Simran Saini Ashton Wagler
- 52. Papa John's | Final Case Analysis | 52 MEETING MINUTES
- 53. MINUTES Team Meeting BUS J401 BS2007 March 29th, 2016 3:00PM-4:00PM 1. Met with group 30 Minutes • Discussed Case 2 and topics to focus on 2. Met with Professor Steele for advice and feedback 30 Minutes Team Leader Signature: _____________________________________________________
- 54. MINUTES Team Meeting BUS J401 BS2007 March 31st, 2016 3PM-4:30PM 1. Met with group 1hr 30 minutes • Split up tasks • Read over research done by team members so far • Elaborated a strategy in order to move forward Team Leader Signature: _____________________________________________________
- 55. MINUTES Team Meeting BUS J401 BS2007 April 7th, 2016 3PM-4:00PM 1.Met with group 60 minutes • Reviewed PowerPoint • Made changes to PowerPoint Team Leader Signature: _____________________________________________________
- 56. MINUTES Team Meeting BUS J401 BS2007 April 11th, 2016 4:30PM-5:30PM 1. Met with group and Nestor to review PowerPoint 60 minutes • Took notes on where to make changes • Went over PowerPoint with Nestor • Fixed the order of the slides Team Leader Signature: _____________________________________________________
- 57. MINUTES Team Meeting BUS J401 BS2007 April 13th, 2016 3:00PM-5:30PM 1. Met with group 2hr 30 minutes • Final review of the PowerPoint • Met with Nestor for a Final review • Met with librarian Katherine Macy • Attempted to find information on the worldwide pizza industry • Practiced presentation Team Leader Signature: _____________________________________________________
- 58. MINUTES Team Meeting BUS J401 BS2007 April 14th, 2016 9:00AM-10:15AM 1. Met with group for final practice 1hr 15 minutes Team Leader Signature: _____________________________________________________
- 59. Papa John's | Final Case Analysis | 59 TIMESHEETS
- 60. Weekday Calender Date Location Description Start Time End Time Total Daily Hours Monday 3/28/16 Home Read the case 7:30 PM 8:00 PM 0:30 Tuesday 3/29/16 Library Met with group & Prof. Steele 3:00 PM 4:00 PM 1:00 Tuesday 3/29/16 Library and Bloomberg Terminal Conducted research on Bloomberg Terminal 3:55 PM 4:45 PM 0:50 Wednesday 3/30/16 Library and Bloomberg Terminal Conducted research on Bloomberg Terminal 12:00 PM 1:15 PM 1:15 Wednesday 3/30/16 Library and Bloomberg Terminal Conducted research on Bloomberg Terminal 7:00 PM 10:30 PM 3:30 Wednesday 3/30/16 Home Worked on breaking down data and PowerPoint 11:30 PM 2:00 AM 2:30 Thursday 3/31/16 Library Met with group 3:00 PM 4:30 PM 1:30 Friday 4/1/16 Library and Bloomberg Terminal Conducted research on Bloomberg Terminal 11:00 AM 1:30 PM 2:30 Saturday 4/2/16 Home Research on Market Line and worked on PowerPoint 1:00 PM 5:30 PM 4:30 Saturday 4/2/16 Home Research on Market Line and worked on PowerPoint 8:00 PM 10:00 PM 2:00 Monday 4/4/16 Home Summarized 2013 & 2015 Earnings Call 9:00 PM 1:00 AM 4:00 Tuesday 4/5/16 Home Finished summarizing 2015 Earnings Call 5:30 PM 7:30 PM 2:00 Tuesday 4/5/16 Home Summarized 2014 Earnings Call 10:00 PM 11:30 PM 1:30 Wednesday 4/6/16 Home Summarized 2014 Earnings Call 11:15 AM 12:00 PM 0:45 Wednesday 4/6/16 Home Finished summarizing 2014 Earnings Call 3:40 PM 6:00 PM 2:20 Wednesday 4/6/16 Home Worked on PowerPoint 9:00 PM 1:00 AM 4:00 Thursday 4/7/16 Library Met with group 3:00 PM 4:00 PM 1:00 Friday 4/8/16 Meeting with Nestor Met with Autumn and Nestor (PowerPoint) 1:00 PM 2:50 PM 1:50 Friday 4/8/16 Professor Steele's office hours Met with Prof. Steele to discuss Case 2 3:15 PM 4:30 PM 1:15 Sunday 4/10/16 Home Worked on PowerPoint 10:30 PM 2:00 AM 3:30 Monday 4/11/16 Meeting with Nestor Met with Nestor to go over the PowerPoint 3:40 PM 4:20 PM 0:40 Monday 4/11/16 Library Met with group 4:30 PM 5:30 PM 1:00 Tuesday 4/12/16 Home Worked on PowerPoint 7:00 PM 11:30 PM 4:30 Wednesday 4/13/16 Home Fixed Timesheets and finished PowerPoint 8:00 AM 12:00 PM 4:00 Wednesday 4/13/16 Practice Met with group 3:00 PM 5:30 PM 2:30 Wednesday 4/13/16 Home Wrote my script and practiced individually 8:00 PM 9:00 PM 1:00 Thursday 4/14/16 Practice Met with group 9:00 AM 10:15 AM 1:15 57.10 Total Time Print Name Sign Name Date Kelley School of Business Honor Code Team 2 Second Papa John's Case Analysis: Total Working Time Mariana Freitas - Time Sheet The honor code applies to any course offered by the Kelley School of Business. All students participating in Kelley classes are expected to uphold the code, regardless of their academic pursuits or major. Students who have been admitted to the Kelley School of Business are expected to continue their commitment to ethical behavior in all of their endeavors, including, but not limited to, course work outside of the Kelley School of Business, internships, co-op programs, community service, and overseas study. By signing below, I acknowledge that I have abided by the Kelley School of Business Honor Code. I also acknowledge that my time sheet is ligitimate and that my hours have not been falsified.
- 61. Weekday Calender Date Location Description Start Time End Time Total Daily Hours Friday 3/25/16 Home Research for Case 1 Q&A 3:00 PM 3:45 PM 0.45 Monday 3/29/16 Library and Bloomberg Terminal Team Meeting, Professor Steele's office 3:00 PM 4:00 PM 1:00 Wednesday 3/30/16 Library and Bloomberg Terminal Listened to 2015 earnings call 7:30 PM 8:45 PM 1:15 Wednesday 3/30/16 Home Read earnings call transcripts (2013 & 2014) 9:30 PM 11:30 PM 2:00 Thursday 3/31/16 Home Researched news and read 2014 annual report 9:15 AM 10:00 AM 0:45 Thursday 3/31/16 Library Team Meeting: Assigned Case 2 tasks 3:00 PM 4:30 PM 1:30 Friday 4/1/16 Home Researched risk factors and added to PPT 11:30 PM 1:00 AM 1:30 Saturday 4/2/16 Home Researched financials and added to PPT 9:00 AM 11:00 AM 2:00 Saturday 4/2/16 Home Financial research, PPT, and compiled notes 8:30 PM 12:30 AM 4:00 Sunday 4/3/16 Home Researched stock fluctuations; finsihed notes 12:45 PM 1:45 PM 1:00 Monday 4/4/16 Library Met with Mariana to discuss Case 2 progress 4:15 PM 5:15 PM 1:00 Tuesday 4/5/16 Home Researched competition and strategies 6:00 PM 7:30 PM 1:30 Thursday 4/7/16 Library Team Meeting: Finalized presentation approach 3:00 PM 4:00 PM 1:00 Friday 4/8/16 Meeting with Nestor Discussed Case 2 and showed PPT 1:15 PM 2:50 PM 1:35 Friday 4/8/16 Professor Steele's office hours Discussed Case 2 and showed PPT 3:15 PM 4:30 PM 1:15 Saturday 4/9/16 Home Research for updated SWOT analysis 10:30 PM 1:30 AM 4:00 Sunday 4/10/16 Home Research for updated SWOT analysis 6:00 PM 6:45 PM 0:45 Monday 4/11/16 Meeting with Nestor Team Meeting: reviewed PPT and assigned slides 4:30 PM 5:30 PM 1:00 Tuesday 4/12/16 Home Studied Mariana's earnings call notes 8:00 PM 9:00 PM 1:00 Wednesday 4/13/16 Practice Team Meeting: practiced presentation 4:30 PM 5:30 PM 1:00 Thursday 4/14/16 Practice Team Meeting: practiced presentation 9:00 AM 10:15 AM 1:15 31:05 Total Time Print Name Sign Name Date Kelley School of Business Honor Code Team 2 Second Papa John's Case Analysis: Total Working Time Autumn Gordon - Time Sheet The honor code applies to any course offered by the Kelley School of Business. All students participating in Kelley classes are expected to uphold the code, regardless of their academic pursuits or major. Students who have been admitted to the Kelley School of Business are expected to continue their commitment to ethical behavior in all of their endeavors, including, but not limited to, course work outside of the Kelley School of Business, internships, co-op programs, community service, and overseas study. By signing below, I acknowledge that I have abided by the Kelley School of Business Honor Code. I also acknowledge that my time sheet is ligitimate and that my hours have not been falsified.
- 62. Weekday Calender Date Location Description Start Time End Time Total Daily Hours Tuesday 3/29/16 Library Met group to start case 2 analysis 3:00 PM 3:20 PM 0:20 Tuesday 3/29/16 Professor Steele's office hours Meeting with Professor Steele 3:30 PM 4:00 PM 0:30 Tuesday 3/29/16 Library and Bloomberg Terminal Research on Bloomberg Terminal 4:10 PM 4:35 PM 0:25 Tuesday 3/29/16 Library Research on Factiva 4:35 PM 5:00 PM 0:25 Thursday 3/31/16 Home Secondary research and Powerpoint updates 12:15 PM 1:30 PM 1:15 Thursday 3/31/16 Library Team meeting 3:00 PM 4:30 PM 1:30 Thursday 3/31/16 Home Powerpoint slides 8:20 PM 9:25 PM 1:05 Friday 4/1/16 Home Powerpoint slides/research 7:30 PM 8:45 PM 1:15 Saturday 4/2/16 Home Powerpoint slides/research 8:00 PM 10:15 PM 2:15 Tuesday 4/5/16 Home Powerpoint notes for slides 1:00 PM 2:30 PM 1:30 Tuesday 4/5/16 Home Powerpoint notes for slides 7:00 PM 8:45 PM 1:45 Thursday 4/7/16 Library Met group 3:00 PM 4:00 PM 1:00 Monday 4/11/16 Home Read earnings calls summary 12:00 PM 1:25 PM 1:25 Monday 4/11/16 Meeting with Nestor Team meeting with Nestor 4:30 PM 5:30 PM 1:00 Monday 4/11/16 Home Update notes for presentation 8:00 PM 9:15 PM 1:15 Tuesday 4/12/16 Home Finalize notes/slides 6:00 PM 8:00 PM 2:00 Wednesday 4/13/16 Practice Team practice/finalize notes 3:00 PM 5:30 PM 2:30 Wednesday 4/13/16 Home Personal Practice 6:30 PM 7:30 PM 1:00 Thursday 4/14/16 Practice Team practice 9:00 AM 10:15 AM 1:15 23:40 Total Time Print Name Sign Name Date Kelley School of Business Honor Code Team 2 Second Papa John's Case Analysis: Total Working Time Peyton Balazs - Time Sheet The honor code applies to any course offered by the Kelley School of Business. All students participating in Kelley classes are expected to uphold the code, regardless of their academic pursuits or major. Students who have been admitted to the Kelley School of Business are expected to continue their commitment to ethical behavior in all of their endeavors, including, but not limited to, course work outside of the Kelley School of Business, internships, co-op programs, community service, and overseas study. By signing below, I acknowledge that I have abided by the Kelley School of Business Honor Code. I also acknowledge that my time sheet is ligitimate and that my hours have not been falsified.
- 63. Weekday Calender Date Location Description Start Time End Time Total Daily Hours Tuesday 3/29/16 Library Talked about case and met with Prof. Steele 3:00 PM 4:00 PM 1:00 Wednesday 3/30/16 Home Read current news and listened to earnings calls 12:00 PM 3:00 PM 3:00 Thursday 3/31/16 Library and Bloomberg Terminal Research on Bloomberg Terminal 12:45 PM 1:30 PM 0:45 Thursday 3/31/16 Library Met with team to split tasks 3:00 PM 4:30 PM 1:30 Friday 4/1/16 Home Started slides 7:00 PM 9:00 PM 2:00 Saturday 4/2/16 Home Competition and current news research/slides 7:30 PM 1:30 AM 6:00 Sunday 4/3/16 Home Re-did slides 8:00 PM 11:00 PM 3:00 Thursday 4/7/16 Library and Bloomberg Terminal Met with librarian and looked for credible sources 12:30 PM 1:30 PM 1:00 Thursday 4/7/16 Library and Bloomberg Terminal Meeting with team and Bloomberg Terminal 3:00 PM 4:00 PM 1:00 Monday 4/11/16 Home Powerpoint, earnings calls and other docs on canvas 8:00 PM 11:30 PM 3:30 Tuesday 4/12/16 Home Read current news on Papa John's 12:00 PM 1:30 PM 1:30 Tuesday 4/12/16 Home Worked on powerpoint & did external research 9:00 PM 11:00 PM 2:00 Wednesday 4/13/16 Practice Practice 3:00 PM 5:30 PM 2:30 Thursday 4/14/16 Practice Practice before presentation 9:00 AM 10:15 AM 1:15 30:00 Total Time Print Name Sign Name Date Kelley School of Business Honor Code Team 2 Second Papa John's Case Analysis: Total Working Time Simran Saini - Time Sheet The honor code applies to any course offered by the Kelley School of Business. All students participating in Kelley classes are expected to uphold the code, regardless of their academic pursuits or major. Students who have been admitted to the Kelley School of Business are expected to continue their commitment to ethical behavior in all of their endeavors, including, but not limited to, course work outside of the Kelley School of Business, internships, co-op programs, community service, and overseas study. By signing below, I acknowledge that I have abided by the Kelley School of Business Honor Code. I also acknowledge that my time sheet is ligitimate and that my hours have not been falsified.
- 64. Weekday Calender Date Location Description Start Time End Time Total Daily Hours Tuesday 3/29/16 Home Prepared ideas for group meeting 12:30 PM 1:00 PM 0:30 Tuesday 3/29/16 Library Group meeting and met with Prof. Steele 3:00 PM 4:00 PM 1:00 Thursday 3/31/16 Home Read Company Earnings Calls 12:00 PM 2:30 PM 2:30 Thursday 3/31/16 Library Group meeting 3:00 PM 4:30 PM 1:30 Saturday 4/2/16 Library Worked on PowerPoint slides 2:00 PM 3:30 PM 1:30 Thursday 4/7/16 Library Group meeting about new ideas 3:00 PM 4:00 PM 1:00 Friday 4/8/16 Home Edited/Created new PowerPoint slides 3:00 PM 5:00 PM 2:00 Monday 4/11/16 Library Discussed PPT layout, final touches as a group 4:30 PM 5:30 PM 1:00 Monday 4/11/16 Home Read earnings call summary -- Case IQ 10:00 PM 11:00 PM 1:00 Tuesday 4/12/16 Home Edited PowerPoint slides with new information 4:30 PM 5:45 PM 1:15 Tuesday 4/12/16 Home Prepared notes for presentation 7:00 PM 9:30 PM 2:30 Tuesday 4/12/16 Home Practiced for presentation 10:00 PM 11:30 PM 1:30 Wednesday 4/13/16 Practice Practiced with team 3:00 PM 5:30 PM 2:30 Thursday 4/14/16 Practice Practiced with team 9:00 AM 10:15 AM 1:15 21:00 Total Time Print Name Sign Name Date Kelley School of Business Honor Code Team 2 Second Papa John's Case Analysis: Total Working Time Ashton Wagler - Time Sheet The honor code applies to any course offered by the Kelley School of Business. All students participating in Kelley classes are expected to uphold the code, regardless of their academic pursuits or major. Students who have been admitted to the Kelley School of Business are expected to continue their commitment to ethical behavior in all of their endeavors, including, but not limited to, course work outside of the Kelley School of Business, internships, co-op programs, community service, and overseas study. By signing below, I acknowledge that I have abided by the Kelley School of Business Honor Code. I also acknowledge that my time sheet is ligitimate and that my hours have not been falsified.
Notas do Editor
- On February 18, 2016, the Compensation Committee of Papa John’s International, Inc. (the “Company”) approved compensation changes to further align the compensation of Founder, Chairman and Chief Executive Officer, John H. Schnatter, with the Company’s other executive officers. Mr. Schnatter’s short term incentive target was set at 75% of his base salary (previously 90% of base salary), the same target as the Company’s President and Chief Operating Officer, Steve M. Ritchie, and the Company’s other executive officers. The Compensation Committee also increased Mr. Ritchie’s base salary from $650,000 to $800,000 and his annual long-term incentive value from $750,000 to $1,000,000 (consisting of $100,000 in performance-based restricted stock units vesting at the end of a 3-year performance period, and the remainder in equal values of time vested restricted stock and stock options with a 10-year term and 3-year graded vesting schedule). The Company’s executives are also eligible for the annual cash incentives and benefits described in the Company’s Proxy Statement filed March 25, 2015. The Compensation Committee also increased the long-term incentive values for each member of the executive leadership team, other than Founder, J. Schnatter. Long-term incentive values: annual equity, restricted stock and stock options, annual cash incentives, performance share award, and benefits.
- 2015: Youngest of the top four chains, so the runway is much longer for Papa John’s Corporate profits doubled and are getting ready to triple over four or five years ago Acquisitions – 19 in Florida, because they were a good fit with current corporate base. No long-term strategy change (20% range for corporate) Announced Better Ingredients, Better Pizza clean label Jan. 1, introduced Papa’s Lighter Choices menu offerings and Online Nutrition Calculator; in mid-December, were the first national pizza chain to announce that the grilled chicken pizza toppings and chicken poppers will consist of poultry that is raised without human or animal antibiotics as well as fed with a 100% vegetarian diet by summer 2016. First national pizza chain to announce that they removed artificial flavors and synthetic colors from the entire food menu. Introduced a Quality Guarantee to underscore commitment to delivering quality pizzas to customers (Papa John’s is guaranteeing customers will love the pizza, but if they don’t, tell them and get one for free – latest milestone) Lower commodities contributed to slightly more discounted pricing across the industry. Papa John’s offered some promotional offers, but maintained the focus of being the superior-quality pizza provider with the higher perceived value, featuring three premium LTOs at $12 each during the quarter. Hope 2015 is an exception relative to G&A deleveraging. Revenues are not going to grow as quickly as they typically would because commissary is such a big piece of revenue number and the cheese numbers bringing the commissary revenue number down and actually keeping it flat, so you don get the typical revenue growth you would see that would keep you from deleveraging on G&A Corporate acquisitions (i.e. Minneapolis) that were underperforming, now are doing fine. Clean Label initiative - By the end of 2015, eliminate all artificial flavors and colors from their food, except soft drinks (first in the pizza industry to make this statement) Enhanced loyalty program – besides earning free pizzas, customers can enjoy sides and desserts Clean label (started 4 or 5 years ago); more defensive, from an integrity point of view. Deep moat around Better Ingredients, Better Pizza. Millenials like more natural ingredients. Strategy to maintain premium pricing by reducing “pass-throughs” and reimbursements in the form of discounts, and investing that in marketing to build the brand, to create a stronger emotional connection and to get credit and reinforce the benefit to the brand Focus on quality and customer experience continues to be a winning strategy for Papa John’s 2015 American Customer Satisfaction Index gave Papa John’s top spot Rated as the leader in the pizza category and two in total of all QSR (quality system regulations) in customer experience in the Temkin Experience Rating
- 2015: Renewing contract with NFL. Q2: Added garlic knots and cinnamon knots to menu and paired it with limited-time offers, Philly Cheesesteak Pizza and Greek Pizza Showcase ongoing efforts through a mix of ads and press releases Introduced Papa’s Lighter Choices (fewer calories) Launched new iOS app and website is in the process of being implemented Papa Rewards (loyalty program launched in 2010) – other competitors discussed plans to add a loyalty program. Evolve the program as a response to competitors? / competitor is testing in Detroit; Papa John’s is watching them closely / stronger effort in the marketplace to promote Papa Rewards, increased acquisition and membership, and along with conversions. Papa rewards – 25 points for one pizza, and now they also offer sides and desserts for as low as 10 points. Specialty pizzas for 30 points. 2013 LTO pipeline award-winning Buffalo Chicken Pizza, Chipotle Chicken & Bacon pizza, and Mega Chocolate Chip Cookie, double cheeseburger pizza. 2014 Patent with new partner Indiana Pacers’ All-Star forward Paul George – campaign with Paul to promote new Sweet Chili Chicken Pizza Per unit cost of the POS system – $20,000 per store
- 2015: PayShare (safe and secure way to split their bill) FOCUS – improve order speed, accuracy, delivery service and team member training (enhance customer experience) Technology enhancement – adapts to mobile, tablet, and desktop; did a re-launch of the iOS app.
- Q4 2015: Current promotion - $9.99 5 toppings pizza directly aligned with Quality Guarantee (implemented to drive new customers from other brands to Papa John’s) Price war in pizza category. Papa John’s has the highest perceived value; manage the business long-term. Only brand who has had 12 consecutive years of even or positive sales. Unique things that contrast to some of the competitors is from a national to a local. Provide flexibility with the local marketing spend, so they can choose and pick their spots (i.e. California is higher than Louisville), which provides the franchisees the opportunity to do what they have to compete and win. A lot of the business is coming from the millennials, because like Chipotle, we use better ingredients and the kids can taste the difference. Take share from the regional and independent chains. National players continue to grow at a more significant clip. Lower commodity drove a slightly more aggressive pricing environment than have been seen in several quarters, with number of very aggressively discounted promotional offers across the value segment of the industry More aggressive pricing activity from some of the national, regionals, and some of the independents within the category, which gave Papa John’s a slightly lower than anticipated comp for the quarter. Discounts from competition caused some issues, mostly from larger players (Little Caesars $5, Domino’s $5.99, Pizza Hut $6.99) Small consumer base that is looking for that value and variety. Pizza Hut advertising and visibility to cheaper pizza has been driving customers away from Papa John’s. Despite competition doing aggressive promotions, high commodities forces them to use cheaper ingredients or put less on, causing a decline in the product quality attributes Higher commodity prices is painful short-term, but long-term it’s advantageous because it weeks out the weaker players and those who don’t believe in quality
- Relationship with franchisees has been more collaborative than it’s been since maybe in the early 1990s when they were just getting started. Sometimes there are disagreements on pricing between corporate and franchisees. Company-owned out execute franchisees. Use corporate restaurants to lead and drive best practices to influence the franchise system. Could not lead the franchisees if they didn’t have corporate stores. With 650 stores that perform, just on every matrices is better than the franchisees, Papa John’s has tremendous clout on guiding the system and influence the system and leading the system. One competitor has 1,000 stores and 1,200 stores and in that situation it is not healthy. In the process of weeding out the franchisees that are not engaged, resulting in the high store closures.
- Relationship with franchisees has been more collaborative than it’s been since maybe in the early 1990s when they were just getting started. Sometimes there are disagreements on pricing between corporate and franchisees. Company-owned out execute franchisees. Use corporate restaurants to lead and drive best practices to influence the franchise system. Could not lead the franchisees if they didn’t have corporate stores. With 650 stores that perform, just on every matrices is better than the franchisees, Papa John’s has tremendous clout on guiding the system and influence the system and leading the system. One competitor has 1,000 stores and 1,200 stores and in that situation it is not healthy. In the process of weeding out the franchisees that are not engaged, resulting in the high store closures.
- 2015: 26 conversion units in International Business in 2015, but no similar conversions planned for 2016. Approaching 400 stores in the UK, 400 in the region of Latin America, and 100 stores in Russia. Focusing on some challenges throughout Asia. Expansion in the US is a long-term deal. Opportunity to go beyond 4,000 is there, but those would be non-trad. Opened 107 units (230 global units in 2015) Q2: International units approaching 1,500 stores in over 40 countries Closures mostly on the domestic side on the nontraditional side of the business. Some of those are contractual agreements that Papa John’s must enter into that have leases that tie up to it. Not an indication of any poor performance happening across the domestic, international business, just continued headwinds that result from commodities from the last couple of years and coming to the tailwind of the investments that were made to the new POS system FOCUS Projection for 2016: papa john’s does a sensitivity analysis where they do a worst, base case, best case, because they don’t want to be too optimistic as the environment in the food industry is always changing. Variability and penetration in some of the franchise markets and the predominant amount of growth has been in the franchise markets. Corporate side in most penetrated markets leads the pack. Challenging pricing competitive environment puts pressure in some underpenetrated markets
- China Franchises: from 144 to 199 (2013-2015) Company-owned: from 58 to 45 2015: New Senior VP of International business (Jack Swaysland) – anticipate a lot of synergies and opportunities to accelerate the overall international business; new Regional VP for Southeast Asia business (Marc Helman) – lived in Korea for over 20 years and speaks Mandarin. The reason they are not doing well in the Asian Pacific is because they don’t have the right folks in place and the right franchises, but they are going to change that. improved China results as a result of reduced depreciation from held for sale accounting. Foreign currency impacted sales negatively by $600,000 Strategic model in China – incorporates menu, model design, marketing changes, and some branding aspects. Too early to trying to take a look at an outcome. Decided to refranchise the 46 stores in the Beijing and Tianjin markets and is actively seeking a high quality franchise market. There have been improvements in the Beijing’s financial results in 2015 but they feel this market will strategically be the most successful long term. Selling the operations in China – don’t expect significant gain or loss. U.K Franchises: from 246 to 319 2015: UK – double digit comp sales performance driven by operation execution, strong digital initiatives, and successful launch of largest national TV campaign in the UK to date. Q2: 300th restaurant in the UK UK – scale is the overall driver to success; national media campaigns with promotion 2013 - Partnership with the Football League in the UK (72 clubs, annual attendance of 16 million)
- China – Asian-Pacific region is pretty tough on all fast food right now. Haven’t figured out China yet. Keep chipping away at it, keep learning, keep trial and erroring and eventually figure out that part of the world. 236 stores in all of China, which is less than 5% of the global portfolio. Growing middle class of 300 M and growing to potentially up to 600 M in the middle class and the consuming class over the next five years to 6 years. Important market. Headwinds since the OSI incident in July, 2014. Different corporate and franchise business. On the corporate side they have a different model in about half of the restaurants, have a delco business (performing well in terms of traffic and sales growth), delivery, and carryout. Most franchises in China are casual dining model. In the process of working on their marketing, menu, model, customer journey and experience. Have completed a significant amount of research as it relates to the design and the menu. Now it becomes around implementation of that work as they work parallel to source and find a very high-qualified franchisee to run the 46 restaurants in Beijing and Tianjin. Too early to trying to take a look at an outcome. testing ground completed extensive market research and are testing a number of different adjustments to the operating It takes time to work in a big market to establish good base of stores that are clustered well and operate consistently Papa John’s decided to buy its Beijing-area outlets as a way to learn. “Owning and operating restaurants and a quality control center in Beijing will allow us to better understand the China market, better support our franchisees in Asia,” Robb Chase, the former international president of Papa John’s, explained in a 2006 press release about the acquisition of the Beijing stores. It has evidently been a costly lesson.
- Increase throughout 2013: Board declared $0.25 regular dividend (first payment Sept. 20). 23% increase in EPS since 2012. Increase in units domestically and internationally. 7.3% increase in revenues in Q1 Peak 03/31/14: began rollout of POS system ?? Decrease 09/30/2014: EPS – biggest headwind is commodity market and investments made in the company Increase throughout 2014 and 2015: shares rallied 26% on the pizza chain’s surging profit growth and technological advancements, making it one of the richest restaurant stocks around. The race to build more sophisticated ordering technology has made pizza chains more efficient. By letting customers pick out their pizza on an app or website, companies can reduce errors and potentially use less labor. Last December, Papa John’s said it was the first of its competitors to generate 50 percent of its sales through digital channels. That technology could be a bludgeon that helps Papa John’s keep small pizza chains at bay, Saleh said. Many restaurants can’t afford those capabilities, he said. "The digital technologies are very expensive to implement,” said Saleh, who has a buy rating on Papa John’s. "It makes it very hard for the independents to compete for the younger customers." Decrease throughout 2015: sluggish third and fourth quarter sales, investors expected better. Investors were underwhelmed by its adjusted EPS of $0.45, and a 0.3% drop in revenue along with a negative change in the company’s full-year forecast. By most marks, the company had a decent quarter. Its EPS of $0.45 was up from $0.39 a year ago and system wide comparable sales increased by 3% in North America and 8% internationally. Revenue did drop the aforementioned 0.3% from $390.4 million in the same period in 2014 to $389.3 million this year. According to Investopedia, the primary motive for stock splits is to make shares seem more affordable to small investors even though the underlying value of the company has not changed. It signals the share price has increased, thus lifting demand and prices.
- Q4 2015: Revenues were down slightly; offset by lower FOCUS equipment sales and lower cheese block prices, which reduced PJ Food Service revenues. For the full year, revenues were up 2.5% with strong comp sales increases of 4.2% for NA and 6.9% for international, again somewhat reduced by lower FOCUS sales and lower block cheese prices. Neither of these significantly impacted profitability. Q3: Revenues were slightly lower than last year because comp sale increases of 3% in NA and 8% internationally were offset by lower FOCUS equipment sales and lower cheese block prices, which reduced PJ Food Service revenues (do not have a high impact on profitability) Q2: Revenues increased due to a 5.5% increase in the number of units (offset by lower cheese block prices, which drove lower revenues in PJ Food Service business since Papa John’s had a constant dollar mark-up on cheese
- The Debt-to-Equity ratio shows Papa John's debt relative to its equity and the resulting financial leverage. The profit margin and gross margin consider profitability compared to sales revenue. Q2 2015: Increase in G&A due to timing and rollover issues. Non-recurring reduction in equity comp last year due to an executive department, which impacted comparisons. Higher health insurance costs, mainly on the claims side, as well as higher legal expenses. Investment internationally, technology, marketing internationally, increased salary and benefit cost for existing employees. Will continue to balance driving strong increases in profitability with making the resource investments necessary to drive the long-term growth of the business Profit margin and gross margin very erratic due to the volatile environment (commodities price, restaurant level bonuses, competitors pricing) 2013 Lower profit margins: lower price from competitors and higher commodity prices Lower gross margins: higher commodities, lower national promotion pricing, and increased restaurant level bonuses 2014 Lower gross margins: due primarily to the higher cheese prices Lower margins: Higher infrastructure costs to support digital ordering and lower margins at print and promotions business decreased $1.6 M on all other segments. Food Service was a little stronger in Q2 of 2013, which made Q2 of 2014 look a little weaker. Bringing in drivers and transportation in-house and there’s some costs that were underestimated. Insurance claims were higher. 2015 G&A up – increases in performance based incentive comp and operations bonuses at the supervision level driven by strong performance. Higher legal and insurance expenses. Marketing investment into international franchise business. Impact of the preliminary settlement of the Perrin, collective and class action, which is a one-time item that negatively impacted the results about $12.3M pre-tax or 0.20 of EPS. Higher insurance cost of $4.5 million due to adverse automobile insurance claims. Dropped significantly during the beginning of 2014 to an increase in costs. By the end of 2015, Papa John’s was able to recover its profit margin. The reasons for this recovery: Cost of sales was 1.3% lower due to lower commodity costs, primarily cheese Advertising costs were 0.2% lower due to benefit of higher sales Occupancy costs and other restaurant operating costs were 0.8% lower due to higher sales and lower mileage reimbursement (lower gas prices) Taxes were 0.8% lower
- 2011: Cash flow provided by operating activities decreased to $92.6 million in 2010 from $103.8 million in 2009. The consolidation of BIBP (BIBP is a franchisee-owned corporation that conducts a cheese-purchasing program on behalf of domestic Company-owned and franchised restaurants) increased cash flow from operations by approximately $6.8 million in 2010 and $22.5 million in 2009. Excluding the impact of the consolidation of BIBP, cash flow was $85.8 million in 2010 as compared to $81.3 million in 2009, primarily due to higher net income. 2012: Cash flow provided by operating activities was $104.4 million for the full-year 2012 as compared to $101.0 million in 2011, primarily due to higher net income, partially offset by unfavorable working capital changes. Cash flow provided by operating activities increased to $101.0 million in 2011 from $92.6 million in 2010. The consolidation of BIBP increased cash flow from operations by approximately $6.8 million in 2010. Excluding the impact of the consolidation of BIBP, cash flow was $101.0 million in 2011 as compared to $85.8 million in 2010, primarily due to higher net income and favorable working capital changes, including deferred income taxes. 2013: increased purchases of property and equipment in 2013 and 2012 primarily relate to expenditures on equipment for New Jersey dough production, technology investments, including our new domestic POS system, (“FOCUS”), and China new store builds. Cash flow provided by operating activities was $101.4 million for 2013 as compared to $104.4 million in 2012. The reduction in 2013, as compared to 2012, is primarily due to working capital needs offset somewhat by higher net income. Cash flow provided by operating activities increased to $104.4 million in 2012 from $101.0 million in 2011, primarily due to higher net income and favorable working capital changes, including deferred income taxes. 2014: Cash flow provided by operating activities was $122.6 million for 2014 as compared to $101.4 million in 2013. The increase of approximately $21.3 million was primarily due to higher net income and favorable changes in working capital and other operating activities including higher depreciation and amortization expense. Cash flow provided by operating activities decreased to $101.4 million in 2013 from $104.4 million in 2012, primarily due to working capital needs offset somewhat by higher net income. The purchases for 2014 include FOCUS equipment costs for domestic Company-owned restaurants and technology investments, including FOCUS software development costs. The purchases for 2013 include expenditures on equipment for New Jersey commissary dough production, technology investments, including FOCUS software development costs, and China new restaurant builds. 2015: Cash flow provided by operating activities was $160.3 million for 2015 as compared to $122.6 million in 2014. The increase of approximately $37.7 million was primarily due to higher operating income and favorable changes in inventory and other working capital items. The prior year included higher inventory levels of equipment to support the rollout of FOCUS to our domestic franchised restaurants. The Perrin legal settlement does not impact 2015 cash provided by operating activities as it was not paid until January 2016. The non-GAAP results shown above, which exclude the items impacting comparability, should not be construed as a substitute for or a better indicator of the Company’s performance than the Company’s GAAP results. Management believes presenting the financial information without these items is important for purposes of comparison to prior year results and analyzing each segment’s operating results. In addition, management uses these non-GAAP measures to allocate resources, and analyze trends and underlying operating performance. Annual cash bonuses, and certain long-term incentive programs for various levels of management, are based on financial measures that exclude the Incentive Contribution. See “Results of Operations” for further analysis regarding the impact of these items. In addition, we present free cash flow in this report, which is a non-GAAP measure. We define free cash flow as net cash provided by operating activities (from the consolidated statements of cash flows) less the purchases of property and equipment. We view free cash flow as an important measure because it is one factor that management uses in determining the amount of cash available for discretionary investment. Free cash flow is not a term defined by GAAP and as a result our measure of free cash flow might not be comparable to similarly titled measures used by other companies. Free cash flow should not be construed as a substitute for or a better indicator of our performance than the Company’s GAAP measures. See “Liquidity and Capital Resources” for a reconciliation of free cash flow to the most directly comparable GAAP measure. The presentation of the non-GAAP measures in this report is made alongside the most directly comparable GAAP measures.
- The following ratios provide insight to shareholders and potential investors. They indicate the return of shareholders and the proportion of earnings distributed to shareholders. Further, the rate of growth Papa John’s can withstand without external financing. Q2 2015: Increased dividend from $0.56 to $0.70 2011: ROCE – 27.074 / SGR – 27.074 2012: ROCE – 31.852 / SGR – 31.852 2013: ROCE – 42.92 / SGR – 36.209 / Div – 15.636 2014: ROCE – 65.089 / SGR – 45.79 / Div – 29.649 2015: ROCE – 130.698 / SGR – 87.837 / Div – 32.794
- 2015: Commodities: cheese is 35% to 40% of cost. Hedge cheese, so in case price goes up it doesn’t put the year in jeopardy with Wall Street. Stay anywhere from 9 to 12 months out in front and by decreasing amounts as they go further. Have a moderate amount of cheese at the corporate level locked in through the end of the year, which gives predictability and visibility to what’s going on
- Opened first restaurants in Israel and announced the signing of a development agreement to open over 100 restaurants in Madrid and the surrounding area. Plans to open in northeastern France. Later this summer, they anticipate opening their 5,000th store globally.
- Opened first restaurants in Israel and announced the signing of a development agreement to open over 100 restaurants in Madrid and the surrounding area. Plans to open in northeastern France. Later this summer, they anticipate opening their 5,000th store globally.